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A market value differs from a book value in that market value is

  • A.what the asset would actually fetch
  • B.the original cost less accumulated depreciation
  • C.fixed by the depreciation method chosen
  • D.always higher than the book value

Answer: A

Correct answer: what the asset would actually fetch

Market value is an economic quantity established by what a buyer would pay; book value is an accounting one, being cost less accumulated depreciation under whatever method was chosen. The two are related only by coincidence, and it is the market value that enters a replacement decision because only it represents money forgone.

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